Offering net-30 terms feels like a normal cost of doing business — until you add up what it actually costs to be the one financing your client's payment schedule. Every day between delivering the work and getting paid is a day your own cash is tied up instead of covering payroll, buying materials, or sitting somewhere it could earn a return. This calculator turns your invoice amount, payment terms, and cost of capital into a dollar figure for that wait, so "net-30 is just standard" stops being a guess and starts being a number you can act on.
How it works
The math treats extending payment terms like a short-term loan you're making to your client, whether you think of it that way or not. Your annual cost of capital — what it costs you to borrow, or what you'd otherwise earn on that money — gets scaled down to match how long the invoice actually sits unpaid. A 30-day wait is roughly 8% of a year (30 ÷ 365), so you apply that fraction of your annual rate to the invoice amount to get the financing cost.
Longer terms cost proportionally more at the same rate: net-60 ties up your cash for twice as long as net-30, so the financing cost roughly doubles even though nothing else about the deal changed. The cost-as-percent-of-invoice figure just restates that dollar cost as a rate, which makes it easier to compare across invoices of very different sizes — a $500 financing cost means something different on a $5,000 invoice than on a $50,000 one.
Worked example
Say you invoice a client $10,000, offer net-30 terms, and your annual cost of capital is 8% — a reasonable stand-in if you carry a business line of credit around that rate, or want a conservative opportunity-cost estimate.
- Annual cost of capital as a daily-scaled rate: 30 ÷ 365 = 8.22% of the year
- Financing cost: $10,000 × 8% × (30 ÷ 365) = $65.75
- Cost as a percent of the invoice: $65.75 ÷ $10,000 × 100 = 0.66%
Stretch the same invoice to net-60 instead and the financing cost roughly doubles to $10,000 × 8% × (60 ÷ 365) = $131.51, because the cash sits unpaid twice as long. Shrink it to net-15 and the cost roughly halves to $32.88 — the lever runs in both directions, and it runs linearly with the number of days.
How to interpret your result
Financing cost is not automatically a red flag — it's the price of a normal business practice, and plenty of client relationships are worth $65 on a $10,000 deal to keep the deal itself. What it's useful for is comparison: across your client roster, this number tells you which relationships are quietly expensive to maintain, especially clients you've let drift from net-30 to net-45 or net-60 without ever repricing for it.
Use it as a starting point for a negotiation, not just a lament. A client who wants net-60 instead of net-30 is effectively asking you to double your financing cost on their invoices — that's a reasonable thing to price into the contract, either as a small rate increase, a partial deposit upfront, or an early-pay discount that gives them a reason to pay sooner. And if your cost-of-capital number is really your opportunity cost rather than actual interest you're paying, remember it's a real cost of the business decision even though no bank statement will ever show it as a line item.
Methodology & sources
The formula is financingCost = invoiceAmount × (annualCostOfCapitalPercent / 100) × (paymentTermsDays / 365), and costPercent = financingCost ÷ invoiceAmount × 100. Both figures round from unrounded intermediate math, so they stay internally consistent at any combination of term length and invoice size, including a same-day payment with zero days outstanding.
The core idea — that extending payment terms shifts financing cost onto the party granting them, and that the cost scales with how long the invoice stays unpaid — is standard trade-credit mechanics; Corpay's guide to business payment terms lays out how net-30 versus net-60 affects days sales outstanding and receivables risk for the seller. This calculator uses a straight-line approximation of that cost based on your own cost-of-capital estimate; it isn't a substitute for tracking your actual borrowing rate or a formal cash-flow forecast, and it doesn't account for compounding, invoice factoring fees, or the risk that a client pays later than the stated terms.